2007 Innovation Plan Executive Summary Throughout the course of human history, people have found new ways to meet their needs by inventing, applying and trading new technologies. But recent advances in telecommunication technologies—including the internet—along with the global shift toward open, market-based economies have made innovation "the single most important ingredient in any modern economy."1 Global communications technologies developed in recent decades, together with modern travel advances, began connecting people from one corner of the globe to the other. Once distant communities became neighbors and trading partners. Firms began competing internationally for greater shares of larger markets, giving people all over the globe more choices about the products and services they could buy. Choice helped people become more discerning consumers, increasing the pressure on competing firms to offer greater value for less money. The increased competition prompted many firms to focus on quality and process improvements, including quality certification programs and new supply-chain and distribution approaches such as offshore manufacturing. This kind of innovation—process innovation—helped firms trading on price and quality thrive, for a time. Our increased global connectedness changed people's interests, tastes and demands, creating opportunities to both meet new market needs and satisfy existing ones in completely different ways. Mobile telephony, for example, enabled many countries to skip an entire generation of communications technology (hard-wired telephones), and created opportunities for enterprising firms to reinvent whole industries (e.g., banking, retail, logistics, etc.) using mobile phones as the primary access point for services. The recognition that process innovation alone is not enough intensified interest in "disruptive innovation"2—the creation of new products, services and technologies that make new markets and generate new wealth. This sparked widespread interest in the process of innovation itself—how, why and under what circumstances it happens. Scholars, analysts, economists and innovators themselves have since studied innovation, identifying a range of factors that make it more likely. There are four essential factors: entrepreneurial talent, research and development (R&D) capacity, connectedness among people and firms, and money to help turn R&D into products and services that people want to buy. And these four things, as it turns out, exist in communities. The new wave of interest in innovation is not process-based, firm-based, or even industry-based, but place-based. As Business Week's recent Competition Issue3 makes clear, in a mobile world, geographic assets matter. Places—communities, not nations—with unique strengths that can attract and cultivate talent will win in the new economy. The new wave of innovation is about place-based innovation capacity—the ability to innovate not once, but over and over again, across industries and diverse communities all over the world. This is the new competitive frontier. And Oregon is well-poised to compete. _____________________ 1 "Thanksgiving for Innovation," The Economist Magazine, September 19, 2002, and cited repeatedly by key innovation leaders. 2 Coined by 20th Century economist Joseph Schumpeter, the phrase is about invention. It places entrepreneurs and inventors at the heart of innovation, and innovation at the heart of competition. 3 August 21-28, 2006 next page